Tag: Entrepreneurship

I was inspired to put together this diagram to highlight the competing forces of risk and return (also known as reward). As I sat on the couch one evening a thought came to me about what separates successful leaders from everyone else.

Successful leaders aren’t smarter. They certainly aren’t more conservative. They do seem to take a lot of risks and for the most part emerge unscathed. Once in a while you will see a leader crash and burn only to rise from the ashes. Unless it is incapacitating or life threatening… most disasters won’t keep a true leader down.

Lots of people have visions of a future they would like to create or see others create, however most of these visionaries never manifest their vision into reality. You could say its easy to dream and quite another thing to take it all the way to realizing it.

The best leaders not only inspire others to follow but also acquire missing knowledge and apply it through successful execution on the route to mastery. This takes balancing risk and return.

The same is true of investing and entrepreneurship. Ask any successful investor or entrepreneur and they will tell you that maximizing returns comes with high risk and that minimizing risk also limits potential returns. The Sweet Spot (The Zone) is found by seeking a balance between these two competing forces. In order to stay in the Sweet Spot takes constant learning, execution and application of the knowledge gained.

When you stop learning, stop applying and stop executing you drop out of The Zone and become either over conservative or take unwise risks that are akin to gambling.

Most people fixate on one end of the spectrum or the other and often wildly swing between the two.

Consider for a moment, what would happen to your FLOW if you followed this simple 4 step strategy:

Locate the Sweet Spot by asking “what does OPTIMUM look like?”

Move into the Sweet Spot

Make ongoing adjustments to stay in the Sweet Spot

Assess the downside risks and develop a strategy to mitigate them

Inventory the potential upside and implement a strategy to capitalize on it

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We all know about setting goals and creating visions, however despite our knowledge of the subject many leaders fall short of legendary and land on mediocre.

The below is an excerpt (paraphrased) from the book titled “Beyond Entrepreneurship” — Turning Your Business into an Enduring Great Company by James C. Collins and Willian C. Lazier.

…you set a goal not by pure analysis, but by analysis plus intuition. You’ll never be able to prove ahead of time that an audacious goal is going to be 100% achievable.

You have to know in your gut that it can be done, recognizing this simple truth: once committed to a bold challenge, the probabilities of success change.

When President Kennedy first proposed the Moon mission, he was advised that there was only a 50/50 chance of success. He believed in America’s ability to achieve the mission, to somehow turn the odds. He knew that if the country committed to the mission, they would somehow find a way to make it happen.

Think of it this way. If someone puts you on a difficult mountain climb and leaves you an easy avenue of retreat, the probabilities of success would be at a certain level, say for the sake of illustration 50%. Now suppose you are on the same mountain and the avenue of escape is removed; if you don’t succeed you die.

The probabilities of success change closer to 100%. Why?

Because you are committed. You’ll fight, scratch, invent, or somehow figure out a way to the top because you have no other choice…

What would happen if you committed to an audacious goal or vision and removed the possibility of not achieving it?